Buying or constructing a house is a dream for every middle and upper-middle-class individual. However, even after a lifetime of savings, it is quite difficult to meet the rising real estate prices. A home loan steps in to help right at this point to help finance their dream house.
However, to get a home loan, it is essential to have a healthy CIBIL score. The minimum CIBIL score for a home loan is 750, but this might vary between banks and NBFCs. This blog will go through the importance of the CIBIL score for home loans.
Why is CIBIL score important for home loan?
The points below highlight the importance of CIBIL scores for home loans for individual borrowers and financial institutions:
Allows lenders to know an individual’s loan repayment capacity
When one applies for a home loan, lenders tend to go through their credit history and other essential information. An individual’s CIBIL score presents a gist of their financial standing and repayment history. Therefore, lenders first analyse their score to know whether they will be capable to repay the loan amount. A person’s regular monthly income and previous repayments or defaults reflect on their CIBIL score.
Influences the loan process
If someone’s score falls in a healthy CIBIL score range, it will directly impact their housing loan application process. With a good CIBIL score, lenders can instantly approve their applications with their desired loan amount at low-interest rates. A higher CIBIL score implies that they repay their existing debts in time and have sufficient balance to fund new loans.
Furthermore, with a high CIBIL score, borrowers can check their pre-approved loans by simply entering their name and a few other basic details on their lender’s official website. These offers allow applicants to check their home loan eligibility and expedite the approval process.
Determines the rate of interest on their home loan
As stated earlier, CIBIL score ratings for home loans reflect the borrower’s credit history and income. Owing to this, banks and NBFCs base their rate of interest on the applicant’s CIBIL scores for a home loan. Consequently, their score will also impact their home loan EMI. Therefore, it is mandatory to have a good CIBIL score, if they wish to pay convenient EMI on the loan amount.
Lets the bank or NBFC know about their credit health
CIBIL scores are important for banks and NBFCs to understand the applicant’s credit behaviour. This implies, that by repaying dues on time, people can improve their CIBIL scores.
However, if they default on any of their credits, their CIBIL score for a home loan will decrease. If their credit score is low, it tells the bank or NBFC about their financial indiscipline and inability to repay the loan amount within the tenor. Based on this, banks or NBFCs will approve their loan application with more or less interest rates.
How to boost their home loan eligibility?
One can boost their home loan eligibility by primarily improving their CIBIL score. Here are other ways to help them gain access to better housing loans to support their dream house.
Repay their debts
To improve their CIBIL score for home loan eligibility, people must repay their dues on time. This will reflect in their credit history and their CIBIL score will grow significantly. Consequently, this will paint a positive picture of them in the eyes of banks or NBFCs. Thus, it helps build chances for one to get their desired loan amount instantly.
Go for a longer tenor
If they have a monetary crunch, but, require a home loan urgently, it would be wise to opt for a longer loan tenor. With this, one would need to pay small EMI amounts throughout the tenor. Thus, they can pay the loan amount conveniently while saving for the future. This will also not allow their score to fall below the minimum CIBIL score for a home loan.
Opt for a home loan balance transfer
Home loan balance transfer allows one to transfer their outstanding debt to a new bank or NBFC. They can opt for this feature when their home loan interest rate is too high to meet. With a home loan balance transfer, one can repay the remaining debt at a short tenure and with a comparatively lower interest rate. On repaying the debt, their CIBIL score for a home loan will increase significantly.
Go for co-application
If their CIBIL score is low, people can opt for co-application of a housing loan with their spouse or a specified relative with a good CIBIL score. Co-application for a home loan brings down the risk of defaulting and does not drastically impact an individual’s CIBIL score.
Furthermore, co-applying for a home loan can also make their maximum borrowing amount increase as lenders will consider the net income of both the co-applicants. In co-application of home loans, there are very low chances of their CIBIL score for a home loan to fall. This is simply because, if one applicant is unable to repay the amount, their co-applicant shall cover for them.
How to check CIBIL score online?
If one is wondering, how to see my CIBIL score online, the following steps will help check their CIBIL score online.
- Visit the official portal of CIBIL
- Tap or click on the “CIBIL Score and Report” or “Click here” icon.
- Type in the required information like their name, email address, password, mobile number, date of birth, ID type, ID number and pin code.
- One will receive an OTP on their registered mobile number. Enter the OTP and select continue
- One will receive a message displaying “You have been successfully enrolled”. Now, click on “Go to Dashboard”
- The system will redirect them to the website of CIBIL. Click on login here.
- After logging in, they can see their CIBIL score and other information displayed on the screen.
Factors like checking their CIBIL score frequently, fixed deposits, using debit cards to make payments or bouncing cheques do not affect their CIBIL score for a home loan. It is also important to note that, one must mention all their source of income and investments to banks or NBFCs while applying for a home loan. To gain access to their desired home loan amount with low-interest rates consider following the above tips.